Q4 2020 Travelers Companies Inc Earnings Call
Good morning, and thank you for holding welcome to the fourth quarter results teleconference for travelers, we ask that you hold all questions until the completion of formal remarks at.
Which time, you will be given instructions for the question and answer session.
As a reminder, this conference is being recorded on January 21, 2021 at this time I'd now like to turn the conference over to MS. Abbe Goldstein Senior Vice President of Investor Relations Ms. Goldstein you may begin.
Thank you so much good morning, and welcome to travelers discussion of our fourth quarter 2020 results. We released our press release financial supplement and webcast presentation earlier. This morning. All of these materials can be found on our website and travelers dot com under the investors section.
Speaking today will be Alan Schnitzer, Chairman and CEO, Dan Wright, Chief Financial Officer, and our three segment President Greg cause loss he of business insurance, Tom Kunkel of bond and specialty insurance and Michael Klein of personal insurance, they will discuss the financial results of our business and the current market environment They will refer.
To the webcast presentation as they go through prepared remarks, and then we will take questions.
Before I turn the call over to Alan I would like to draw your attention to the explanatory note included at the end of the webcast presentation. Our presentation. Today includes forward looking statements.
Company cautions investors that any forward looking statements involve risks and uncertainty and is not a guarantee of future performance actual results may differ materially from those expressed or implied in the forward looking statements due to a variety of factors. These factors are described under forward looking statements in our earnings press release.
And in our most recent 10-Q and 10-K filed with the SEC, we do not undertake any obligation to update forward looking statements.
Also in our remarks or responses to questions. We may mention some non-GAAP financial measures. Reconciliations are included in our recent earnings press release financial supplement and other materials materials available in the investors section on our website and now I'd like to turn the call over to Alan Schnitzer.
Thank you Abby good morning, everyone and thank you for joining us today.
The address our fourth quarter and full year results a quick comment on current affairs.
Yesterday, we witnessed the most American of events peaceful transfer of power from one democratically elected the administration to the next.
It's not a political statement, but it patriotic one to say that we want to see this next administration succeed.
We have significant challenges to overcome.
Upon demonstrating the health and safety of our loved ones and neighbors.
A distressed economy growing the lives and livelihoods millions.
And a deeply divided society, which undermines our collective sense of security and wellbeing.
Let's hope yesterday marks the beginning of our political leaders on both sides of the aisle, taking a constructive approach to addressing these challenges.
And with that I'll turn to results.
I'm pleased to report a very strong finish to the year with fourth quarter core income of $1 $3 billion or $4.91 per diluted share.
Core return on equity of 25%.
Each up meaningfully from the prior year quarter.
We're also pleased to report full year core income of $2 $7 billion generating core return on equity of 11, 3%.
A substantial margin over the risk free rate and our cost of equity.
Our ability to deliver these results in the face of on historic pandemic, a record high number of Pcs catastrophe events and record low interest rates is a testament to the strength of our franchise.
More specifically to our talented and committed workforce.
The value of our hard to replicate competitive advantages and.
And our expertise in balancing risk and reward to achieve industry, leading returns over time.
The principal driver of the higher level of core income for the quarter was very strong underlying underwriting income.
Resulting from record net earned premium of $7 5 billion and an underlying combined ratio that improved three four points to an excellent 88, 7%.
We're pleased with the underwriting results in all three segments.
We once again recorded a sub 30 consolidated expense ratio for the quarter and full year, demonstrating that our strategic investments in improving productivity and efficiency continued to pay off.
Turning to investments this quarter, our high quality investment portfolio performed well.
Generating net investment income of $572 million after tax.
The non fixed income portfolio continued to recover from the pandemic related impacts earlier in the year.
Our operating results together with our strong balance sheet enable us to grow adjusted book value per share by 7% during the year.
After returning $1 $5 billion of excess capital to shareholders.
Including $672 million of share repurchases, which we resumed in the fourth quarter.
Turning to production notwithstanding the challenges in the economy, we continued to successfully execute on our marketplace strategies to generate growth in topline.
Net written premiums in the quarter grew by 3% driven by strong renewal rate change broadly across the book.
And continued strong retention in all three segments.
Given the headwinds facing the industry, we expect the favorable pricing environment to continue for some time.
Business insurance in our core middle market business renewal rate change was a record nine 1%.
Four five points over the prior year on about one point sequentially, while retention remains strong.
Segmentation and pricing is key in this business and to that end the quality of the execution underneath the headline production numbers was excellent.
In bond and specialty insurance net written premiums increased by 12%.
Renewal premium change in our domestic management liability business achieved a record 10, 9%.
Driven by record renewal rate change.
While retention remained strong.
In personal insurance net written premiums increased by 7%.
Driven by strong renewal premium change on our agency homeowners business and strong retention and new business in both agency auto and agency homeowners.
Fourth quarter production contributed to full year record net written premiums of almost $30 billion up 2% compared to last year.
Adjusting for the premium refunds to be offered to our personal insurance auto customers net written premiums were up 3%.
Our strong top line result in the context of this year's difficult economic environment.
Taking a step back let me direct your attention to slide 18 of the webcast presentation and put this year's results into a broader context.
I've shared before our belief that any commitment to delivering industry, leading return on equity over time requires a strategy to grow over time.
To that end a few years ago, we laid out a strategy to achieve profitable growth in the context of the forces of change we've previously identified as impacting the industry.
As you can see on the slide.
Despite the challenging economic and operating environment 2020 was another successful year of the execution of that strategy.
Since 2016, we have grown net written premiums at a four 5% compound annual rate.
Substantially outpacing both GDP growth over the same period.
And our growth rate over the prior year's in the decade.
We accomplished that while maintaining a stable underlying underwriting margin.
In other words, we haven't grown by under pricing the product or changing our risk profile.
The growth has come organically from customer segments products geographies and producers that we know well.
Over that same period through our ongoing and relentless focus on optimizing productivity and efficiency.
Also improved our expense ratio by about two points compared to the run rate from earlier in the decade.
As you can also see on the slide the result of all of that is significantly higher underlying underwriting income.
Meaningfully higher cash flow from operations and double digit growth in invested assets.
Those results have contributed to our ultimate objective of creating shareholder value through industry, leading return on equity over time.
Our core return on equity has increased in each of the last three years and averaged 11% over that period.
And that 11% is after burden the impacts of significant cat and non cat weather activity mean.
A meaningful increase in social inflation, historically low interest rates and the global pandemic.
In short our performance this year on over recent years is the result of a sound strategy and a successful achievement of our strategic objectives.
Looking forward from here thanks.
Thanks to our team our strategy our capabilities and our strong track record of innovation and execution, we feel very well positioned to capitalize on the opportunities ahead as the economy continues to recover and beyond.
Before I turn the call over to Dan I want to acknowledge and thank my 30000 colleagues.
Many of whom are listening this morning for their tireless efforts over this past year.
Notwithstanding concerns for their own safety and responsibilities for taking care of loved ones on educating their children. They never wavered from our purpose of taking care of the people we're privileged to serve.
Our mission of creating shareholder value.
I couldnt be more proud of this team.
I also want to acknowledge and thank all those who have been involved in the extraordinary effort of developing and manufacturing cone vaccines in record time on the.
Scientists to the regulators to those who volunteer to participate in the trials.
It's a remarkable feat.
The side of those vaccines rolling off the line inspires optimism for the coming year and the sheer human will and ingenuity behind the effort inspire hope for the future.
And with that I'm pleased to turn the call over to Dan.
Thank you Alan.
Core income for the fourth quarter was $1 262 billion.
Up from $867 million on the prior year quarter.
And core ROE was 25% up from 14, 8%.
The improvement in both measures was the result of very strong underlying underwriting results are.
Our fourth quarter results include $29 million of pre tax cat losses, compared to $85 million on pre tax cat losses in last year's fourth quarter.
Recall that last year's fourth quarter Cat losses included a $101 million benefit from recoveries under the underlying aggregate cat Treaty.
Whereas in 2020, we exhausted the cat treaty in the third quarter.
So there were no recoveries under the treaty in this year's fourth quarter.
This quarter's cat results include about $40 million of favorable development in our loss estimates for events that occurred earlier in the year.
<unk> in the current quarter for which I'll provide more detail shortly was net favorable $180 million pre tax.
The underlying combined ratio of 88, 7%, which excludes the impacts of cats and P Y D improved by three four points from the prior year quarter.
Our pretax underlying underwriting gain of $804 million increased by nearly 50% over the prior year quarter, reflecting the benefit of higher levels of earned premium and higher margins driven by earned pricing that exceeded loss cost trend and continued favorability in personal auto loss experience.
For the quarter.
Loss is directly related to COVID-19 totaled a modest $31 million pretax split about evenly between business insurance and bond and specialty insurance.
More than offsetting those losses were lower levels of auto claims in both personal insurance and business insurance.
Net impact of the Covid environment on the consolidated underlying combined ratio amounted to a benefit of about two and a half points, mostly in personal insurance.
We continue to take a cautious approach in estimating the net impact of Covid related losses, given the ongoing uncertainty in this environment.
As has been the case throughout the year the majority of direct Covid losses that we booked through year end remains an IV NR.
Looking at the full year net impact of Covid costs and benefits, including the impact of premium refunds to policyholders, our consolidated underlying combined ratio benefited by about a point.
The fourth quarter expense ratio of 29, 4% brings the full year expense ratio at 29, 9%.
Well throughout the year, we continued to make the investments necessary to fuel our continued success, our ongoing focus on productivity and efficiency. Once again resulted in a sub 30 expense ratio.
Fight the downward pressure on earned premiums from the impact of a soft economy on insured exposures and the premium refunds, we issued to our personal auto customers.
We continue to be comfortable with the consolidated expense ratio of around 30%.
After tax net investment income improved by 9% from the prior year quarter to $572 million strong returns in the non fixed income portfolio at a higher level of invested assets were partially offset by the expected decline in fixed income yields.
Looking forward to 2021, we expect that after tax fixed income NII, including earnings from short term securities will be between 420 at $430 million per quarter as we project that the benefit of higher average levels of invested assets will be more than offset by a lower average yield on the poor.
Folio, given the lower interest rate environment.
Turning to reserves.
Net favorable prior year reserve development occurred in all three segments and totaled $180 million pre tax in the fourth quarter.
In business insurance net favorable <unk> of $124 million was driven by better than expected loss experience in workers' comp primarily from accident years 2017 and prior.
Partially offset by an increase to reserves related to very old years on a run off book.
In bond and specialty net favorable <unk> of $32 million resulted primarily from better than expected loss development in the surety book.
In personal insurance net favorable <unk> of $24 million was driven by the automobile line.
When our combined 2020 schedule P is filed early in the second quarter. The line of business analysis will provide more detail on the loss trends. We have noted in our commentary throughout the year with favorability in workers' comp commercial property and the personal lines coverages and some strengthening in the commercial liability lines much of which.
It was on very old accident years relating to a run off book.
Page 19 of the earnings presentation provides information about our January one cat Treaty renewals, our longstanding corporate cat ex ol treaty renewed on terms in line with the expiring treaty.
And continues to provide coverage for both single cat events and the aggregation of losses from multiple cat events.
Regarding the underlying property aggregate catastrophe <unk> Treaty, we first purchased for 2019, we ever knew the treaty again for 2021.
While the Treaty will continue to address qualifying Pcs designated events in North America for which we incur losses of $5 million or more.
2021 renewal includes a $5 million deductible per event.
In prior years Pcs designated events that cost us more than $5 million accounted towards the treaty from dollar one.
The treaty provides aggregate coverage of $350 million part of $500 million of losses for both our aggregate retention of $1 $9 billion.
Aggregate retention for 2021 increased from 2000, Twenty's 155 billion.
Largely reflecting recent years' experience and anticipated growth in our property book.
Hurricane and earthquake events once again have a $250 million per occurrence cap.
And for 2021 wildfires are also capped at $250 million per event.
Incorporating our assumptions about cat and non cat weather for 2021, we expect the full year impact of the treaty on our underlying combined ratio to be roughly half a point and we anticipate only a minimal impact on the total combined ratio.
Those impacts are consistent with the assumptions we had in each of the past two years.
Turning to capital management operating cash flows for the quarter of $1 $9 billion were again very strong all our capital ratios were at or better than target levels, and we ended the quarter with holding company liquidity of approximately $1 $7 billion.
For the full year operating cash flow exceeded $6 billion for the first time ever and reflected.
The benefit of continued increases in premium volume.
Subrogation recoveries from PG any related to the 2017, and 2018, California, wildfires and lower overall claim payouts as courtroom and other settlement activity slowed throughout the year due to COVID-19 related shutdowns.
Higher levels of cash flow gives us the flexibility to continue to make important investments in our business return excess capital to our shareholders and grow our investment portfolio.
Interest yields decreased modestly as credit spreads tightened during the fourth quarter and accordingly, our net unrealized investment gains increased from $3 8 billion after tax as of September 30th to $4 $1 billion after tax at year end.
Adjusted book value per share, which excludes unrealized investment gains and losses was $99.54 at year end, 7% increase from a year ago.
We returned $419 million of capital to our shareholders this quarter, comprising dividends of $218 million and share repurchases of $201 million for the year, We returned $1 5 billion of capital to shareholders through dividends and share repurchases.
Finally on our financial modeling note, let me turn your attention to slide 20 of the webcast presentation.
As we entered 2021, we again thought it would be helpful to highlight the seasonality of our cat losses over the prior decades.
As shown on the data second quarter has regularly and noticeably been our largest cat quarter.
Cat losses in the second quarter has been about twice as much as any other quarter on average on the second quarter has been our largest cat quarter and seven over the past 10 years to.
To wrap it up we're very pleased with the quarter and full year results, especially given the challenging circumstances.
Now I'll turn the call over to Greg for a discussion of business insurance.
Thanks, Dan for the fourth quarter business insurance produced $713 million of segment income an increase of almost 60% over the fourth quarter of 2019.
Higher net favorable prior year reserve development underlying underwriting income and net investment income as well as lower cat losses, all contributed to the favorable year over year increase.
We're pleased with the underlying combined ratio of 93, 6%, which improved by two eight points from the prior year quarter. We benefited again from earned pricing that exceeded loss trend with an impact this quarter of a little more than a point and a half.
There's also a point and a half of improvement due to the favorable comparison to the fourth quarter of 2019, which was elevated due to the re estimation of losses for prior quarters.
Turning to the topline in light of the ongoing macroeconomic challenges we remain pleased with the resilience of our business.
Net written premiums were only slightly lower than the prior year quarter with strong rate and high retention, mostly offsetting modestly lower levels of insurance exposures as well as lower new business.
The lower insured exposures reflect lower levels of economic activity as well as impacts from our active management of terms and conditions and deal structures, including deductibles attachment points and limits.
Turning to domestic production, we achieved a record renewal rate change of eight 4% up almost four points from the fourth quarter of last year, while retention remained high at 83%.
This quarter marks the eighth consecutive quarter with renewal rate change was higher than the corresponding prior year quarter.
We continue to achieve higher rate levels broadly across our book as rate increases in all lines other than <unk>.
Workers compensation were meaningfully higher during the quarter as compared to the prior year.
Importantly, we continue to feel great about our deliberate and granular execution in terms of rate and retention on an account by account and class by class basis.
Segmentation beneath the headline numbers was once again excellent.
Also one other thing thats not apparent in the headline numbers as the contribution to margins from that.
Active management terms conditions and deal structure that I mentioned a minute ago. We're doing this broadly across the book, but most notably in our national property business.
The tighter terms tend to persist beyond the rate cycle.
New business of $440 million was down $35 million from the prior year quarter.
Given the lower levels of economic activity and given them. The hardening market conditions. There is a higher proportion of distressed business in the market.
New business production reflects our disciplined approach to that business risks.
Risk selection is particularly important during circumstances like these.
As per the individual businesses.
And select renewal rate change increased to four 2%.
More than two points from the fourth quarter of 2019 and more than one point from the third quarter of this year.
Retention of 77% was down from recent periods.
Of deliberate execution as we pursue improved returns on certain segments of the business.
As I mentioned above we're pleased with the segmented execution underneath the aggregate result.
Importantly, we have not slowed down on our commitment to invest in product development and ease of doing business, which position us well for long term profitable growth in this business.
In middle market renewal rate change increased to nine 1%, while retention remains strong at 86%.
Renewal rate change was up four five points from the fourth quarter of 2019, and almost a point from the third quarter of this year.
Additionally, we achieved positive rate on more than 80% of our accounts this quarter on more than 10 point increase from the fourth quarter of last year.
To sum up we feel terrific about our results and execution, especially given some of the unusual economic challenges related to the pandemic.
We continue to improve the profitability of the book, while investing strategically for the future.
These investments include enhancing the experiences for our customers and distribution partners developing new insights for our underwriters.
Digitizing, the underwriting transaction and creating efficiencies.
Samples of capabilities released this year include.
Rollout of our completely redesigned box to point out small commercial product, which includes industry leading segmentation.
A fast easy quoting experience.
This new product is now available on 23 states and performing consistently with our expectation.
Advancement of our industry, leading strategic work intake initiatives, which allow for automated receipt of submissions from the various technology solutions, our agent partners views and the seamless routing of those submissions, which improves the experience for our distribution partners and is more efficient for us.
Enhancing our my travelers customer self service application and lastly, our simply business and Zen insurance platforms continue to advance their digital capabilities and offerings in the alternative platform space.
We're as confident as ever that strategic investments like these together with our meaningful competitive advantages.
<unk> us well for long term profitable growth.
Including I would like to acknowledge and thank our employees agents and brokers for their partnership as we seamlessly delivered virtual solutions for the benefit of our combined customers.
With that I'll turn the call over to Tom.
Thanks, Greg.
On to the specialty delivered strong returns and double digit growth in the quarter. Despite the ongoing headwinds of COVID-19.
Segment income was $164 million nearly flat with the prior year quarter as the benefit of higher business volumes and a higher level of net favorable prior year reserve development were offset by an underlying combined ratio, which while still strong at.
85% was higher than the prior year quarter.
The underlying combined ratio of three seven points driven by the impact of higher loss estimates for management liability coverages, primarily losses attributable to COVID-19 related economic conditions.
As we discussed last quarter the products that we write in this segment are susceptible to elevated loss levels in times of severe economic downturn.
We experienced that during the financial crisis and again in recent quarters due to the impacts of the pandemic.
Nonetheless, with the strong rate levels, we're achieving we expect that the underlying combined ratio in 2021 will improve a little bit from the roughly 87% in the second half of 2020.
Turning to top line net written premiums grew an outstanding 12% in the quarter, reflecting continued improved pricing in our management liability business with nearly flat surety production. Despite the continued economic impact of COVID-19.
On public project procurement and related bond demand.
In our domestic management liability business, we're pleased that renewal premium change increased to a record 10, 9%.
Driven by record high renewal rate change, while retention of 89% remained near historical highs.
These production results demonstrate the successful execution of our strategy to pursue rate in light of elevated loss activity, while maintaining strong retention levels and our high quality portfolio.
We will continue to pursue rate increases where warranted.
Domestic management liability new business for the quarter increased $13 million, primarily reflecting our thoughtful underwriting and this elevated risk environment.
Consistent with last quarter submissions are up while quote activity is down.
So on and specialty results were again strong despite the challenges brought on by COVID-19.
Beyond the numbers notwithstanding our focus on managing through the challenging environment.
We continued to invest in differentiating our businesses in the eyes of our customers and agents on broker partners, while positioning ourselves for continued profitability and competitiveness in the future some.
Some highlights from 2020 include continuing.
Doing investments in our surety business to help our contractor clients more effectively manage risk, while providing insights that will enable us to more profitably manage their business.
Highlighting digital platforms that will improve the speed and convenience of accessing management liability and small charity products for our agents and brokers.
And investing in a new sales management platform that will enhance productivity optimize workflow management and increase sales.
Lastly, I'd like to thank our employees and distribution partners for their commitment to creatively and effectively addressing the needs of our customers in these most unusual times.
And now I'll turn it over to Michael to discuss personal insurance.
Thanks, Tom and good morning, everyone.
In personal insurance, we're very pleased with our fourth quarter and full year results.
For the fourth quarter segment income increased to $457 million on our combined ratio improved to 84, 1%.
Full year segment income was $1 $2 billion on the combined ratio was 89, 7%.
The significant improvement for both periods compared to the prior year is primarily driven by lower frequency of automobile losses as well as the benefit to underwriting income from higher business volumes.
In addition, the full year results include higher net favorable prior year reserve development and elevated catastrophe losses.
Net written premium growth for the fourth quarter and full year was 7% and 5% respectively with continued strong retention and higher levels of new business, resulting in record net written premiums of more than 11 3 billion for the year.
Agency automobile profitability was very strong with a combined ratio of 86, 5% for the fourth quarter.
The underlying combined ratio for the quarter improved 12 points continuing to reflect favorable frequency levels.
Approximately one third of the improvement in the quarter is from favorable re estimates of activity for prior quarters in 2020.
We continue to observe lower claim frequency as a result of fewer miles driven reflecting the ongoing impact from the pandemic.
We will continue to analyze and incorporate current trends into our state specific underwriting and pricing decisions as we balance business volumes and profitability.
In agency homeowners and other the fourth quarter combined ratio of 81, 9% increase relative to the prior year quarter, driven by a higher underlying combined ratio and an increase in catastrophe losses.
The fourth quarter included one catastrophe hurricanes data with no recoveries from the catastrophe aggregate reinsurance treaty.
The underlying combined ratio of 78, 5% was five points higher than the prior year quarter due to higher non catastrophe weather related losses and to a lesser degree increases in other losses, specifically elevated fire losses.
The full year combined ratio of 93% was comparable to the prior year with increased favorable prior year reserve development and improved underlying results offset by elevated catastrophe losses.
The underlying combined ratio of 82, 9% was almost three points better than last year, driven by lower non catastrophe weather related losses.
This improvement demonstrates the success of our continuing efforts to improve returns on property, while growing the business.
Turning to quarterly production overall results were again very strong.
We're pleased with our momentum in agency automobile retention was 84% and new business increased 12% contributing to the 3% year over year growth in policies in force.
Renewal premium changes were lower given our pricing actions in response to the favorable loss environment.
We continue to see growth in this profitable line.
Yes.
Agency homeowners and other delivered another excellent quarter with retention of 85% and a 21% increase in new business, while renewal premium change again exceeded 8%.
Policies in force were up 8% from a year ago. These.
These results reflect our continued efforts to grow while improving profitability.
Looking back 2020 was both a challenging and successful year for personal insurance.
We achieved record levels of segment income net written premium and policies in force.
Our continued success reflects the execution of our strategy to meet customers, where they are give them what they need and serve them how they want.
Examples include nearing completion of our quantum home two point on rollout, which is now available on over 40 states.
Increasing the take up of Intel a drive by enhancing our auto telematics offering at 17 States and just this week, we introduced Intel a drive in Canada as well.
Improving our customer self service capabilities with our new my T mobile app, which will be rolled out more broadly throughout the first quarter of 2021.
Planting an additional 500000 trees for customer enrollment and paperless billing, bringing the total number of trees planted through our partnership with American forests to $1 5 million.
And just recently announcing the acquisition of insurer match and innovative digital online platform that allows customers to compare offerings for more than 40 carriers across the United States.
We expect to complete the acquisition in the first quarter of 2021 subject to customary closing conditions.
Before I wrap up I'd like to add my thanks to our team and our distribution partners for continuing to deliver value to our customers, despite the challenging and uncertain environment.
We have strong momentum going into 2021 and are well positioned to deliver profitable growth while investing in capabilities that will continue to enhance the value of our franchise.
Now I'll turn the call back over to Abbe.
Michael This is Tom Kunkel I, just wanted to jump in quickly and mention that I did misspeak. When I was discussing management liability new business I believe I said it increased by $13 million.
And it is actually decreased by $13 million.
Thanks, Tom Thank you and operator, we are now ready to turn to your questions.
Certainly as a reminder, if you'd like to ask a question. Please press star one on your telephone keypad.
With your question press the pound key in the interest of time and to allow everyone. An opportunity. Please limit yourself to one question and one follow up.
Our first question comes from the line of Michael Phillips with Morgan Stanley. Your line is open.
Michael Phillips with Morgan Stanley Your line is open.
Yeah, Hi, everybody can you hear me.
We can good morning.
Good morning, Thanks, I've kind of choppy connection so I apologize if you couldn't hear me.
That's on the quarter.
Let's start on business insurance.
Yes.
We're seeing a nice nice improvements still on our core margins a bit of a slowdown.
Yes in the renewal rate change still.
Still strong is your highest expense quite a while but a bit of a slowdown from prior quarter.
I guess any reason to think and I think Alan you said again, I'm, sorry, I was a bit choppy.
I think you said you expect rates to continue some club if I heard you correctly I guess, given the margin improvement and what I've seen is a bit of a slowdown in the renewal rate change is there any reason to not think we are close if not already out of peak.
<unk> for business insurance.
Michael.
We're at record levels, and we're compounding on compounding so it's hard to look at it this execution and fine.
Any negative in that and from here.
What is positive.
On the historical numbers the segmentation is really important and I think the point Greg made in his prepared remarks.
About the benefit of.
Tightening terms and conditions and other levers. So so all of that is really important and from here I think this plays out for a while and it's a function of rate adequacy.
All the drivers are environmental so pri.
Primarily loss activity think about social inflation think about weather's think about about wildfires you got.
The interest rates that appear to be lower for longer cost and availability of reinsurance.
Losses impacting the industry and I suspect for some markets, maybe maybe still reckoning with social inflation. So.
I expect the favorable rate environment to continue and persist at levels that will.
<unk> and expanding margins for for a while.
Okay. Thank you very much for that and then second question I guess, Greg you mentioned.
I apologize also a little bit choppy, but you mentioned comps in pricing there on comp we're hearing from external sources and a lot of the <unk>.
Markets.
Results net.
Net of a bit of inflection in comp pricing not much but a bit of a turn at least I guess what are you seeing in comp.
P Y D. There was strong loss trends seem to be pretty favorable there. So maybe comment on if you are seeing a.
A bit of a turn in pricing on comp kind of what's driving that and should we expect that the loss given the loss trends that you'd be pretty favorable there as well. Thanks.
Yes. Good morning, Michael This is Greg yet we continue to think we are at or near a bottom in workers' comp and the evidence that we look at is the bureau of loss cost recommendations and our own rate structure and so yeah. We continue to believe that and I'll. Just remind you that we are in a <unk> solution and we feel terrific about our entire book of business work.
<unk> comp is usually just one of the many solutions that we're offering our customers, but yes. We continue to believe we are at or near the bottom.
Okay, great. Thank you Greg.
Your next question comes from the line of Ryan Tunis with <unk>.
Autonomy your line is open.
Hey, Thanks, good morning.
I guess just a question for Alan.
We haven't seen before Q numbers, but to the third quarter.
Really substantial increases in IV and are an economically exposed lines like commercial auto.
NGL.
So obviously reported claims have been slow to come in relative to your peers.
I guess Im curious what Youre learning.
It's core to reopen and things like that.
Is that starting to ease that still starting to look conservative or.
On.
Are you seeing a higher based on reported claims.
So we support those initial loss estimates.
So Ryan I think the best way I can explain it is obviously going back a few years we saw some.
Some elevated loss activity, we responded to that over a couple of quarters.
And I'd say that more recently, we've been sticking to that higher level and what.
What we're seeing in the data frankly might be a little bit favorable to what we would've expected, but were not responding to that because.
We think there is some disruption in the data and so for now we're going to stick with our view of the longer term trends.
Is that responsive.
Yeah. That's helpful and then I guess on it.
For Greg.
Just looking on the growth.
In business insurance similar to last quarter, but.
It looks like some of the Kpis with tenant exposure was a little bit better sequentially and even new business wasn't down quite as much it looks like a lot of that was workers' comp.
I'm just trying to think about.
How are we trending into 2021.
Based on what Youre seeing relative to.
The negative 3% that we posted here in the fourth quarter.
Yes.
As you said Ryan.
Have seen improvement exposure as the economy starts picking up we've shared with you for some time now that we do believe were highly correlated with the overall GDP.
In terms of the GL worker's comp the ratable products that followed payrolls.
And sales receipts of that sort and so as that starts picking up we believe we will see some as we're starting to see on our book already some improvements on our production specifically towards the exposure metric.
I will just add to that Ryan that our book is.
Greg's point's exactly right, there's a correlation there, but I just think given the high quality of accounts on business that we write.
Actually done a little bit better than even we might have thought related to relative realm.
Relative to economic activity.
Thanks.
Thank you.
Your next question.
Comes from the line of Tracy <unk> with.
Barclays Research your line is open.
Okay.
Thank you and good morning.
Court liability Andre who the hub pricing our loss from I guess I'm mindful of the economic slowdown just means less court activity.
Tracy It's Dan you broke up a little bit at the beginning of the question do you mind repeating it.
Absolutely apologize for that.
Just thinking about the tour.
Liability arms race, we think about it.
Who may be ahead pricing or loss trend I guess on mindful that given the economic slowdown there is less activity.
Yes, so remember Tracy.
When we talk about loss trend and.
Thats, all in and Thats, including our.
Sure.
More recent views over the last couple of years of elevated loss environment.
For things like social inflation and so when we're looking at the written and now earned rate numbers that are coming through business insurance. That's that's clearly ahead of loss trend.
I think to your second point.
We are looking at the data as it comes in now and not assuming that that's the new normal.
We assume that what we're seeing is.
Slower levels of claim payments that wont necessarily ultimately be lower levels of claim payments. So we stuck with our.
More normal long term view that we think those loss costs are higher but having said that where rates are now we think rates ahead of loss trends.
Okay excellent and then just on my follow up Greg was talking about income.
In terms and conditions I'm wondering if you could just unpack that maybe give an example, like I've heard on the reinsurance side, they've been a little bit tighter on silent cyber.
I don't know if Tom had any view on management liability.
Yes, sure Tracy I'll, just give you a sense too.
Two different dynamics between the property on the casualty lines property, you have a lot more opportunity on terms and conditions.
The bowls insured to value margin clause language changes that help.
Prove the margins for us and provide some co insurance back to the customer in terms of.
<unk> the term deal structure that you can think of that more on the casualty side and so.
Umbrella attachment points are increasing in women's management, making sure that we're putting very thoughtful capacity around the limits that we offer so that's some of the activity that we're doing across the portfolio.
And Tracy.
Just to give you a specific example, because you asked for that we do think about it we do add for example, communicable disease exclusions.
Industries and segments and customers, where we think that's important to do so Tom.
And.
The way it looks really in the management liability businesses.
The focus has been largely on pricing.
But certainly a lot of work on deductibles or self insured retentions and limits coming down.
Both cases, and if we are really going to see it.
A policy terms.
Near future cyber would certainly be the most likely place where that would occur in the short term.
Thank you.
Okay.
Your next question comes from the line of Elyse Greenspan with Wells Fargo. Your line is open.
Hi, Thanks. Good morning, My first question was on that day.
This insurance margin guidance.
We have a 150 basis points.
Oh, great exceeding trend in the quarter.
Was there anything else like one offset within the margin and then could you give us a sense of the net sorry, if I missed it the net Colgate.
Benefit on including the frequency impact within the quarter.
Okay.
Dan I'll take that so so price versus trend I think greg's comments and it was a little more than a point and a half so think about that as being between a point and a half in two points.
On the other thing that Greg called out, which we would say in terms of the comparison might be a little unusual is remember in last year's fourth quarter. We told you we took about a point and a half of sort of prior quarter catch up as we adjusted our view of the liability loss ratio was last year, so that impacted the year over year compare.
Arison as well to the Covid question very modest as it was last quarter, so not really big enough to mentioned a small favorable but think about that in the tenths of points on which is why it didnt get attention in the scripts.
Okay. That's helpful. And then my second question is on me.
Ben's ratio.
I think last quarter, you pointed to kind of see like around 30 is like a good run rate.
But continue to come in better than that.
Back to you within business insurance expense ratio.
This quarter.
Last quarter is there something related to COVID-19 expenses or.
Kind of expense ratio volume was down a little bit when we think about where you guys did comment on is on following maintenance.
Yes.
Covid has had some some pluses and minuses on the on the expense side on the one hand there've been some higher provisions for things like.
Bad debt, but there have been savings in things like travel and expenses when you step back and look at the full year and on a consolidated basis I'm not at all surprised where we were I think.
Coming out of last year, we said, we'd be happy with something around a 30% full year. This year is at 29 nine I said again in my comments, we're probably pretty comfortable at this level. So I think I think we've settled.
Our probably going to say on what we're thinking about expense ratio.
Okay. Thank you for the color.
Thanks Louise.
Your next question comes from the line of Jimmy Buhler with J P. Morgan Your line is open.
Hi, Good morning, So I had a question first on just your views on business interruption exposure and it seems like.
So the trending in the favor of the insurance industry, so far at least in the U S. But.
What your view is in terms of your exposure and whether the FCA decision.
Makes any has it makes you reassess your exposure in Europe.
Yes, good morning.
Our view on business interruption exposure for us remains unchanged.
Nothing in that FCA decision in Europe that caused us to think any any differently about our exposure or the or the reserves that we put up more recently there was a decision earlier this week in Ohio related to another insurance company that was adverse to that company and generally speaking we prefer not to comment on pending litigation.
<unk>, whether it's ours or anyone else's, but since you asked the question I would just point out that our standard policy language is different from the language that issue in that case in some very key respects.
So in in Ohio, and elsewhere, we remain very confident in our policy language.
You'll know differently about our business interruption exposure and I guess I would just.
Caution everybody to keep in mind that over the last few months and across the country. The vast majority of these cases have been in the favor of insurers.
Okay, and then secondly, just what are your views on pricing in commercial auto obviously recently litigation activities declined a lot, but do you think prices have gone up too.
Loss costs sort of social inflation litigation go back once the virus abates.
Jimmy Theres, just not much more competitively sensitive than our pricing strategy. So I think we're going to we're going to probably stay away from where pricing is going by line, but I'll just reiterate what we said before which is we think this is a favorable pricing environment that that's going to play out for a while and it's it's a function of rate adequacy and there still is a rate need and commercial on it.
So.
The one degree or another we will continue to I think.
The benefit from the rate environment commercial loans.
Okay. Thanks.
Thank you.
Our next.
<unk> comes from the line of Mike Zaremski with Credit Suisse. Your line is open.
Hey, good morning. Thanks.
First question.
About.
Top line versus kind of buybacks you know I recall, a number of pre Covid you guys kind of talked about.
Given topline was was picking up just yet.
You wanted to make sure we understood that.
Buyback levels might not resume at the same ratio as in the past.
Kind of trying to think through the dynamics going forward.
Earnings are are healthy and improving but the top line is still.
Look I'm not going to put words in your mouth. It seems you know maybe still to be a little weak due to the economy to do should we be thinking that there might be more room.
For share buybacks in the near term.
Hey, Mike It's Dan.
I think youre thinking about the right dynamics I don't know that it necessarily lead you to a conclusion about what we're going to do in the near term and again.
So we're going to think about this over a longer period of time to the degree that.
As Alan commented, we have experienced and been able to generate more topline growth in recent years than we had historically.
Current COVID-19 environment notwithstanding.
That's that's something that we look to do on a go forward basis, and even this year plus 3% when you adjust for the personal insurance auto refunds that we made.
The comments that we made a year or so ago would still hold true I think to the degree that the topline grows that's going to require us to hold more capital because everything that requires capital grows with it reserve balances grow your investment portfolio growth.
And the only point, we were really trying to make when we made those comments a year or so ago was don't think about is perpetually being able to return 100% of earnings in the form of dividends and buybacks, we're going to have to hold some of that for growth so that would still be true.
The amount by which we would have had to increase capital this year might be slightly less than we would've expected coming into the year, because COVID-19 had a little bit of a dampening effect on the topline, but directionally all those sales teams would still hold true.
Okay understood that's helpful.
Lastly.
Shifting to workers' comp specifically.
I guess some firms have talked about and it sounds like you guys are talking.
Talked about less clear.
Claim for you what he is doing.
During the pandemic.
But still kind of.
Holding you've said too like pro broadly on the buy segment kind of still holding your your picks.
Conservatively.
Historically have you seen kind of a more.
On more of a catch up or later claims filings.
Workers' comp maybe after.
Previous.
Recessionary periods.
Is that.
Dynamic you guys are contemplating.
Yes, let me let me just give you a little color on on how we see on thinking about the workers' comp loss activity. So first of all the <unk>.
Covid related claim rate is relatively low relative to the infection rate and lower than we might have expected and the severity on COVID-19 related latest workers' comp is also coming in a little better than we had thought.
There is there continues to be some benefit from non COVID-19 related frequency as people are working from home.
But there is still is in our minds a degree of uncertainty to your point about how COVID-19 related workers' comp claims are going to play out over time, so we've been pretty cautious in the way that that we've been booking for workers' comp loss is to make sure that we don't get surprised by that.
Now historically, putting COVID-19 aside historically in a recession, you get sort of offsetting forces in workers comp you've got people, who wanted to stay on the job. So they're less inclined to go out and so frequency is down a little bit, but severity goes up a little bit because once people go out they tend to stay out longer on workers comp that historically for us.
S in recessionary periods. The net of those two things have been a little bit of a positive.
You mean every circumstance is different and so hard to know for sure, but that's generally what we've seen in the past.
So.
I think that's sort of that's sort of the landscape as we see it on workers' comp loss activity.
And Alan and I will follow up to follow up with you I was kind of I'm trying to allude to that.
Figure out post recession.
You see a kind of jumped on.
Any kind of spike in frequency.
I appreciate the comments about during the recession. There was a net benefit just curious if there was kind of a catch up.
Historically close to recession.
I just don't have that data in front of me from from prior recessions and so I'm a little hesitant to shoot from the hip.
I'm, just saying I'm, just not sure I mean as far as.
We're looking around the room at each other.
Don't think theres anything that we think would be all that particularly significant but but again I just don't have the data in front of me to be responsive to that.
Thank you.
Thank you.
David Mcmahon with Evercore Your line is open.
Yeah.
Hi, Thanks, Good morning, I guess.
Just another question on business insurance underlying loss ratio.
150 basis points of core improvement now in <unk>, that's improved I think last quarter, you said, it improved 100 basis points year over year.
I guess as we think about.
Obviously right.
Earning in about the 5% loss trend is there is there any reason to think that that shouldn't continue to accelerate as we head into 2021.
As standard.
All else being equal no you'd see mathematically I think what you've seen in the last couple of quarters is what.
You would you would have expected to see based on the comments that we started making a year ago. When we felt that we were reaching the point where.
Written rate was was reaching or exceeding loss trend and then that would start to come through on an on an earned basis to the extent that written pricing has continued to increase we would expect the earned impact of that to continue to increase on on a lagging basis again, all else being equal and rarely is all else equal, but looking at those two things.
Yes.
Right. Okay. Thanks, I appreciate that Dan and I guess, Greg just a question.
On an exposure growth and specifically.
You had mentioned the dampening impact of terms and conditions and the impact that that had on exposure growth.
I guess moving is there any way to quantify that.
And maybe.
As we think about heading into 2021.
Any any sort of view in terms of how this may impact.
Terms and conditions may dampen exposure growth as we enter into 2021.
Hey, David It's Greg that's just competitively sensitive so we give you exposure overall, we'd give you a rate we give your RPC, but we really don't break down exposure in terms of the insured exposure versus deal structure in terms and conditions. So that's just something we don't provide.
Yes.
Okay. That's fair thank you.
Thank you.
Your next question comes from the line of Brian Meredith with UBS. Your line is open.
Hey, Thanks first one Greg just on the select business if I take a look at the retention rates have dropped pretty meaningfully from the second quarter. I guess my question. There is that due to just.
The economy and the impact that's having on small businesses or is it that you're kind of pushing rate terms and conditions here and that's having an effect on your retention and at what point do you need to lay off maybe a little bit again net retention ratio back up.
Yes, good morning, Brian Yes, it really is a combination of bolt on a profit improvement initiatives, which isn't just for select as we've been share and thats across the entire portfolio, but when we look at the uptick in rates and the offset and retention our product managers and underwriters can see the variance on the loss ratios versus.
What we retained and what we what lapsed and we feel very comfortable with the with the trade off between those two so we're going to continue to improve the margins on the select business and then in terms of your comment on the pandemic. We've certainly seen since the pandemic the select business as is felt the flow the most reduction with the pen.
Dominic on smaller businesses and so new business is up.
We felt that but we feel great about the quality of the new business that we are writing in the select business right now.
Great I, just had a effective tension to what couldnt.
Sure sure you share it could be up.
Probably just to put a finer point on on Greg's comment, which I agree with but.
We've been at these types of retention levels performed select so this isn't an unusual place for us to be in and I guess, you're looking at headline numbers. We're looking at a very granular set of data underneath that shows us exactly what's the.
With the execution is in terms of rate retention loss ratio. So so we feel very very good about this execution.
Great and then my follow up here.
Alan how are you thinking about potential liability exposures to back to work plans. This is eventually the economy reopens and.
Do you have protections in some of your policies to to maybe mitigate some of that exposure what are your thoughts on net.
Yes.
It's a great question I'm glad the ash, we would have hoped that there would've been some federal liability protection I just think given the way things have played out there's probably less likely to happen.
But there are a couple of things that still have one there've been a number of states I think more than 30 states that in one form or another have taken some kind of action to provide some COVID-19 liability protection at the federal level, we've got a more right leaning bench today than we did four years ago, certainly so that helps a little bit and then we can address it through.
Like rate and risk control and risk selection and as I mentioned before in some industry classes.
We have started to put and communicable disease exclusions, where we think that that could be important. So we're.
It's an exposure it's out there I think it's I think it's unfortunate because I think it's the the plaintiff's bar the benefits at the expense of economic recovery, but we will manage through it just fine.
Alright. Thank you thank.
Thank you.
Our next question comes from the line of Josh Shanker with Bank of America. Your line is open.
Thank you.
Okay.
Sure.
Hey, Josh we can't hear you at all.
Okay.
Okay.
Hey, Josh.
How do we what are you hearing next call in May.
Yeah go ahead, sorry about that I guess those headphones don't work that I was trying to you okay.
<unk> <unk> solution.
Anyway.
An area that doesn't really get enough attention national accounts, because we always talk about business insurance ex national accounts can we talk about the.
What is the trend there in terms of premium how much of the fall off net area. Do you think is temporary how much comes back what's the distribution.
On that business in terms of premium volume.
So think about as we get to the end of Covid I guess.
Hey, Josh This is Greg, yes, yes national accounts was down 5%.
For the year and that's a business where a couple of large accounts can make up a quarter or a year and that was the case for us in 2020.
We just had more loss larger accounts, the new and we felt that on the top line now as you said that it's an important part of our portfolio, where we are encouraged around the national accounts and we've recently relaunched our service entry for claim service and we continue to invest in it and it's an important part of our portfolio.
And to the extent in terms of the accounting for that.
I assume there's a lot of audit accounting are we still in the audit accounting fees for that and now we're earning through and as the economy picks up we'll see auto book accounting go the other direction, how should we expect net trend.
Josh its Dan I'm, not I'm not quite sure I understand your question, but to the degree that.
A lot of our business insurance accounts are subject to audit, including some business in national accounts generally speaking.
On this year, we've seen a lower level of audit premium additions not surprisingly given given the lower level of overall economic activity.
I don't have the data in front of me.
No that we've heard anything thats, particularly different in the national accounts front than say in middle market. So I think broadly speaking, we've seen audit premium activity behave probably not surprisingly.
In response to what Youre seeing in the more general economy I guess.
Now I'll stop it.
Are we more or less through the audit account period by <unk>. It was a bigger issue in <unk> and now the.
On the sort of premiums submissions are in line with with your exposures or are we still at a period of time, where we're seeing that headwind come through on your premium numbers due to weaker audit accounts, yes.
Yes.
Be careful about thinking headwind in terms of year over year, there's less audit premium than there was last year, we haven't yet reached the point where in aggregate audit premiums have turned negative they're just lower positive. So it impacts the growth rate year over year and to your point it will.
It will continue for a while because in many cases youre doing audits.
15 months after the after the policy terms were set in the first place and so there is still a while to work through the COVID-19 impact on on policies that havent, yet reached that maturity level.
Alright, well. Thank you I'll probably have some more questions, we'll take them offline. Thank you very much. Thanks.
Thanks, Jeff.
Your next question comes from the line of Mayor Shields with <unk>. Your line is open.
Great. Thanks. So one quick question on personal insurance and then a follow up on business insurance.
Michael are you pricing auto for normalized driving or are you trying to adjust pricing.
Or sort of the short term, but fluctuating driving behavior that we're seeing during COVID-19.
Sure Josh this.
This is Michael I would say that we are as I mentioned sort of continuously adjusting pricing levels.
To reflect our outlook.
And again driving loss levels have continued to be depressed therefore frequency levels have continued to be depressed.
Our view is that.
In 2021 that will start to normalize, but we think we're going to be at depressed driving and frequency levels for a period of time and so.
We are we are factoring that into.
Our pricing as I mentioned last quarter, we filed a handful of decreases in about five states.
In the fourth quarter.
And we have some more planned in the first part of 2021 again to respond to that better than long term normalized loss experience.
Okay. That's helpful.
And then I guess, a follow up for Greg I'm wondering whether it's fair to say that maybe business insurance results were better than they look because presumably there was some headwind from the exposure to the excellent trend and because also presumably workers' compensation represented a smaller percentage of earned premiums and I Hope I was hoping you could comment on those two factors.
Meyer, it's Dan so.
Mix will contribute as you suggest rights on the degree that there are different loss ratios in different parts of the book are growing at different paces, that's going to have an impact.
I'll jump in here on this one because on the exposure front.
We've said what exposure is positive that a portion of exposure behaves like rate and therefore can can be helpful to margins.
It's not necessarily the case that when exposures are modestly negative as they are here that the same holds true on the inverse here. What you are seeing is generally lower levels of insured exposures fewer employees lower levels of cash register sales things that drive.
GL type exposure unless you actually got to the point, where say there was wage deflation in the price per risk was going down.
You don't at least at this point have the same kind of adverse impact on margins from negative exposures that you do.
To margins when exposures are running positive.
Okay fantastic. Thank you.
Your next question comes from the line of Paul Newsome with Piper Sandler Your line is open.
Good morning, and congratulations on the quarter quite remarkable.
Greg you made a comment about a higher proportion of.
Distress business.
In the market and I just wanted to make sure I was interpreting that comment correctly are you talking about essentially more on the business going into excess and surplus lines or are you thinking more along the lines of.
The businesses themselves are struggling with the economy.
Paul Let me just.
Jumping on it.
Greg picks whenever I get wrong, but I think neither actually what.
In a market like this where in some cases, you've got some capacity issues, where you've got firming rate distribution generally is is solving problems in the market and so.
The accounts it ended up in the market for trading are just more difficult risks to right. So it's not it's not that it's necessarily move into E&S inside there.
Business is net necessarily with economic issues. These are just difficult from an insurance risk perspective.
Yes.
Okay.
And then just.
Just to quickly investment.
Net income was also.
Very very strong I thought.
Anything in there we've been so focused on underwriting anything in there that we should.
Consider this as a good run rate or is there anything we should just be two Nunavut investment income results.
Hey, Paul it's Dan so.
I guess I'd point, you to the net investment income.
Slide on the webcast presentation, and I would point you to page six so.
We gave you some outlook in terms of what we think the run rate looks like for the fixed income portfolio. The variability that we've seen in the last three quarters has really been in the non fixed income portfolio and so if you look at the bottom right hand quadrant of that chart. It shows non fixed income over the last eight quarters or so.
And what you could see as sort of pre COVID-19.
That was the last three quarters pre COVID-19 had been $70 million or so of <unk>.
Non fixed income then you see a big dip in the second quarter remember at that time, we talked about that was the impact of the disruption to the equity markets that happened in the first quarter coming through our results on a lagging basis in Q2, and then as markets have come back we've seen some of that rebound come through our numbers and so what you see in Q3 and Q4.
Our very strong results and in the non fixed income portfolio.
If you just look at that chart you should get the sense that part of that is the bounce back from the big dip we saw on the second quarter and so I wouldn't take that as indicative of a new run rate on the non fixed income base.
Great, Thanks folks and congrats on the quarter again.
Thanks, a lot.
We have time for one final question, Phil Stefano with Deutsche Bank. Your line is open.
Yeah. Thanks for squeezing me in at the end here so.
You had mentioned.
Court case in Ohio, and that there is a difference in the terms and conditions and I was I was hoping you could just.
Remind us what's the difference on the policy Wordings as it continues to give us this confidence.
Issue.
So for for travelers and it might be for others, just given how that court case one.
Yes, Phil.
So.
Circumstance subject to continuing pending litigation, so I am hesitant, particularly on the policy wording.
There is or are frankly, right in front of me to start.
The language for you so on.
Maybe we can take that offline and figure out a way to do it but it's probably right now it's not the right the right venue.
I will say, we said from the very beginning that we've got confidence in our in our policies and the way we think it would respond to business interruption.
So far.
And virtually every every case we've had.
I haven't had a bad outcome anyway.
So I think I'll, just reiterate our confidence in the language that we have and say that we don't feel any differently about our business interruption exposure and leave it at that for now if that's okay.
No that's fine I figured that was the answer but it's always worth a shot.
The second follow up for you just looking at the underlying loss ratio in auto.
And trying to compare and contrast third quarter to fourth quarter results.
It felt like we had the story.
Miles driven being down auto accident frequency benefiting.
But we're looking at a difference of 700 basis points give or take on.
Underlying.
How much of this is miles driven coming back how much of this is potential short term pricing actions that you are contemplating how do we look at these two quarters.
To help us as a base for for what the forward Covid impact could be.
Bill It's Dan Let me, let me jump in I think we look at both of the last two quarters as extremely good results in the third quarter was maybe an.
An outsized good results remember as we've gone throughout the year, we've been trying to set our our expectation of when you look at miles driven.
Then filter that through what are the specifics of our book what do we expect to see for losses, then as months and quarters go by.
Losses actually emerge so it's a little bit of a moving target.
The variances have been significant I wouldn't put a tremendous amount of stock in the difference of what came through the loss ratio.
In one quarter versus the next I think.
As Michael probably indicated and as you would not be surprised by on a go forward basis, we wouldn't expect margins to continue to be that strong.
On auto and you see that reflected in our pricing actions.
The most recent quarters so.
Get back more to think about the year.
In aggregate, which is definitely had a benefit.
We had a benefit from the Covid environment and.
And recall that in response to that we've also returned more than $200 million of premiums to policyholders.
I don't know I can give you any more specific answer than that.
Great. Thanks.
The question and answer session has ended it is now my pleasure to turn the call back over to Abbe Goldstein for final remarks.
Alright. Thank you all again very much for joining us.
We appreciate that.
Usually if there was any follow up please get in touch directly with Investor relations, Thanks, and have a great day.
This concludes the travelers fourth quarter 2020 results conference call. We thank you for your participation you may now disconnect.